Property renovation in France

Finance your property renovation

Finance your property renovation - using a mortgage to buy a property to renovate

Finance Home : Costs of Renovation : Finance your Project : Tax and VAT / TVA : Reduced rate VAT rules

Some people are in the fortunate position that they have sufficient funds to pay outright for a property to renovate, and also to pay for the renovation work. Most frequently this is because an existing house has already been sold. Only later does the concern about whether to sell the existing property arise.

For others, the dream of renovating a property requires additional funding, so the question of mortgages and choosing the best financing method arises. So here I offer advice about how to finance your property renovation.

Usually this discussion will only apply to those who retain their employment and a home in the UK during the renovation work. It would be very difficult (maybe impossible) to arrive in France with no employment and immediately seek a loan or mortgage to buy a run-down house to renovate.

But in the UK if you have a property worth significantly more than the outstanding mortgage, and can demonstrate that you have income, then it should be reasonably easy to organise a mortgage to buy a property in France.

It will be easier for a property that is already in good repair, but even for a 'renovation project' it is likely that funds can be raised - with surplus value in your existing property being used as security.

But is it a good idea? It is certainly still possible in many areas to buy a ruin and pay for the renovation work, and end up with a property worth significantly more than the total cost. But equally lengthy delays and significant overspends can eliminate this gain.

Your renovation project will probably cost more if you are not in the same country, since you will be relying more heavily on paid architects or project managers.

On the plus side, things will probably go well, and you will be sitting on a capital gain at the end of the project. So in principle you could sell the property and pay off the debts. Hopefully you won't need to, and you will be tempted to sell up in the UK and come to live in it instead, but it is reassuring nonetheless. Interest rates in the UK and in France have been low for quite some time now, and it is quite common to be able to fix a loan interest rate in advance for the length of the mortgage. This helps remove a significant part of the risk.

There are now a few mortgage lenders and brokers in the UK who specialise in providing the best mortgage rates and flexibility to those hoping to borrow money to buy a property in France. I recommend you talk to more than one of these mortgage specialists, to get a variety of opinions on the approach that is best for your circumstances. They willl usually not lend more than 75% of the property cost, so you will need to finance the rest of your property renovation project yourself, from available funds. Also funds will not usually be made available in advance of a renovation - so if you buy a ruin for £20,000 and plan to spend £80,000 to renovate it, a mortgage lender is unlikely to offer more than £15,000-£20,000 up-front, although they may agree to release more funds as the work progresses.

The last note is on the subject of tax - if you do sell your property in France as soon as it is renovated the usual tax applied is capital gains, but on a new-build house or a ruin substantially rebuilt from an uninhabitable shell it is usually VAT that will apply.